The UK’s second-largest trade credit insurer, Atradius, has revealed the number of claims they received in the hospitality sector increased year-on-year by 43% in Q3 2023, as they urge pubs and restaurants to diversify to overcome a potentially quiet first quarter in the new year.
The sector has faced significant challenges in recent years as firms battled with rising costs, increasing energy costs, and staff shortages. While the falling inflation rate and improving interest rate have increased consumer confidence, feeding into the 46% decrease in claims quarter-on-quarter in Q3, there is still a major concern for firms as Atradius predicts a quieter-than-usual Q1.
Experts at Atradius suggest that while there are some encouraging signs of recovery in the sector – with 37% of business owners operating at a higher profit margin than in the same period last year – hospitality firms must plan ahead to safeguard themselves and their businesses against an expected dip in consumer spending.
Owen Bassett, insolvency and hospitality expert at Atradius UK, advises:
“It’s safe to say that the hospitality sector has, like all of us, had a turbulent few years since the COVID-19 pandemic, particularly with economic uncertainty, rising costs and staffing challenges in the fallout. Despite this, many hospitality firms have weathered the storm and continue to do so, which is heartening to see. Ultimately businesses that can show agility in operating costs, supply chains, and consumer offerings are showing the most resilience, and we are now urging hospitality businesses to look at where opportunities lie in 2024.
“In 2023, we saw consumers seek out experiences that were either high-end or affordable and accessible. This benefitted fast food brands, while we saw a downturn for mid-range restaurants, for example. We are predicting that there will be a high street revival in 2024, as consumers seek out engaging in-person experiences. In fact, nearly half (44%) of consumers would prioritise an in-person experience over purchasing items, even if their spending is reduced.
“Staying tuned in to consumer habits will be vital for hospitality firms, especially as we approach a quieter-than-normal January. Consumer priorities, such as convenient online experiences (for example using booking apps), sustainable practices, and the largest uplift in recreation and culture that we saw in Q1 2023, all highlight a major opportunity for businesses that can overcome a downturn in consumer spending.
“While business rates are expected to increase in April, with a predicted £1.56 billion impact on businesses, it is still unclear exactly what support will be offered to firms hit hard by this. The election may bring more support for businesses that are under pressure, but taking active steps to safeguard business’s finances during busy seasons is the best way to ensure resilience for your business. Proactive financial planning, such as safeguarding supply chains and credit agreements – a significant vulnerability – with insurance, to avoid the ‘domino effect’ of insolvency can make all the difference as we enter a quieter period.”
“In 2024, hospitality workers can safeguard their businesses by staying attuned to evolving consumer preferences and industry trends. Embracing technology will be crucial, from implementing user-friendly online booking systems and mobile apps to leveraging social media for marketing and customer engagement, all the while adapting to consumer trends. Hospitality businesses remaining agile and adaptable to unforeseen challenges will be crucial in navigating the dynamic landscape of the hospitality industry in 2024 and ensuring that their businesses continue to prosper”.